As Australia gears up for the Federal election on May 3, discussions around negative gearing and capital gains tax have resurfaced, emphasising the need for prudent rental reform.
Suzanne Brown (pictured), president of the Real Estate Institute of Western Australia (REIWA), stressed that without sensible adjustments to tax settings and tenancy legislation, the country risks exacerbating the current rental crisis by alienating current and potential property investors.
In Western Australia, recent legislative changes have shown just how sensitive investors can be.
For instance, the COVID rental legislation of 2020-21, which was implemented during a prolonged market downturn, saw a significant drop in rent prices and high vacancy rates.
These factors combined to drive a sharp decline in investment, with the rental supply shrinking by nearly 9% or 20,000 properties, further deepening the rental crisis.
Similar restrictive measures in Victoria, including the COVID debt levy and stringent landlord regulations, have led to a notable decrease in active bonds—down by 3.6% or nearly 25,000 properties from September 2023 to September 2024, Brown said.
According to a recent REIWA survey, changes to property taxes and regulatory frameworks are major factors influencing investors’ decisions to exit the market.
Notably, 74% of respondents said legislative alterations would prompt them to sell their investment properties. Issues such as significant hikes in land tax have led investors to divest assets to avoid escalating costs.
Brown said it’s important to recognise the vital role private investors play in the rental market.
Approximately 85% of rental properties are owned by private investors, with most owning just one or two properties.
This underscores the necessity of maintaining stable policy environments that not only retain current investors but also attract new ones.
The potential for further reviews of the Residential Tenancies Act looms, with implications for Western Australia’s growing population and still-recovering rental supply.
Brown warned that if legislative conditions become too onerous, investors may continue to withdraw, plunging the market into deeper difficulties.
As such, she called for a balanced approach to future rental reforms to support a healthy, sustainable rental market.
At the national level, with the upcoming federal election, political parties are urged to consider the repercussions of tax reforms and rent controls carefully.
The goal should be to avoid unintended consequences that could tighten rental markets further, making it even more challenging for renters across Australia.
